Fabrice Defever is also affiliated with GEP and the Centre for Economic Performance at the London School of Economics and CESifo. I thank an anonymous referee for thoughtful comments and suggestions. I am also grateful to Pol Antràs, Andrew Clark, Keith Head, Laura Hering, Philippe Martin, Thierry Mayer, and Jean-Marc Siroen for helpful comments on early versions, as well as participants at the Second CEPR Conference of GIST ‘Globalization, Investment and Services Trade’ (University of Ljubljana, June 2010), the GEP conference on Trade Costs (University of Nottingham, June 2009), the ‘Agglomeration and Growth in Knowledge-Based Societies’ conference (Kiel, 2007), and GDR Urban and Spatial Economics (Lille, 2007) workshops. I also thank Nicolas Lambert and Celine Rozenblat for helping me to find the maps, and Thierry Mayer for helping me to calculate the distances between regions. An analysis of the quality of the database and its management was carried out at the Invest in France Agency (AFII) under the supervision of Fabrice Hatem and Edouard Mathieu. I thank them for their help with this task. I am also grateful to the consulting group Ernst & Young and more specifically to Barry Bright and Mark Hughes. The usual disclaimer applies. Email: fabrice.defever@nottingham.ac.uk

Abstract

Abstract Using six years of firm-level data covering 224 regions of the enlarged European Union, we evaluate the importance to a firm of locating its activities (production, headquarters, R&D, logistics and sales) close together. We find that, after controlling for regional characteristics, being closely located to a previous investment positively affects firm location choice. However, the impact of distance is dependent on the type of investment (production or service). The impact dies out faster for service activities. Finally, we show that a surprisingly positive effect comes from locating a new production plant close to an existing production investment, but in another country.

7Nobuaki Yamashita, Toshiyuki Matsuura, Kentaro Nakajima, Agglomeration effects of inter-firm backward and forward linkages: Evidence from Japanese manufacturing investment in China, Journal of the Japanese and International Economies, 2014, 34, 24CrossRef

8Heterogeneity and distance. some propositions on how differences across regions, firms and functions affect the role of distance in fdi location decisions, ECONOMIA E POLITICA INDUSTRIALE, 2014, 4, 81CrossRef